Lockdown Drives Small Business Owners Deeper into Debt

Small business owners are getting deeper into debt to ride out the coronavirus pandemic even as Korea posts record exports and consumption is picking up.

According to the Bank of Korea on Wednesday, corporate loans from banks increased by W42.1 trillion during the first quarter of this year to W1,436 trillion (US$1=W1,114).

The sharpest increase in debt was among small business owners, rising by W31.1 trillion from the previous quarter to account for 74 percent of total loans and the biggest increase in debt since lockdown was tightened in the second quarter of last year.

Song Jae-chang at the Bank of Korea, said, "As coronavirus infections increased, offline stores were hit especially hard and their debts increased."

Loans taken out by people in the real estate, finance and insurance industries increased at the same rate as the fourth quarter of 2020, but there was a sharp increase among retailers and wholesalers from W5.3 trillion to 7.5 trillion and hospitality entrepreneurs from W2.3 trillion to W3 trillion.

Loans to manufacturers, which declined by W2.2 trillion in the fourth quarter of 2020, increased by W7.1 trillion.